Paper companies have warned that the rising cost of raw materials and the introduction of an EU CO2 carbon emission trading scheme will raise prices and kill off profits.

The Confederation of European Paper Industries (CEPI) said the trading scheme will take £750m out of the European paper industry, effectively wiping out its annual profits. 

It described it as the "first direct EU tax in history", as it even stipulates how the monies raised should be spent by member states. 

"[The draft legislation] will generate up to £55bn per year in 2020, as the impact assessment shows. This will see the largest amount of money being taken out of the EU economy ever, unprecedented in scale and impact," it said in a statement. 

According to Finland's Pellervo Economic Research Institute, the European Commission's draft CO2 emission quota trading legislation will cause price hikes of between 6% and 12% when it comes into effect in 2013. 

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